When we want to achieve something - a goal, a dream or any difficult task, we plan our steps in advance. We try to think of the implications of each step that we will take and make a course of action based from that analysis. Each of these actions, we hope, will get us to where we want to go or help us achieve the goal we have set out to accomplish in the future.

This forward thinking exercise helps us develop our foresight. Although foresight is defined as the ability to predict the future, we don’t have to be fortune-tellers to develop this skill. When it comes to our financial health, using our common sense will suffice in developing our grasp of what will come next.

How Did They Do That?

I’m writing this article in Germany and I can’t help but be envious of their cities. Not only are they more prosperous but it seems that they’ve thought about every possible detail to create a good-quality and functioning infrastructure. Their airports are state-of-the-art. Their trams are an efficient mode of public transportation. Their waste management is excellent. I could not find anything not worth emulating.

But they obviously did not achieve this overnight. It must have taken them a considerable degree of planning and foresight. Each piece of their system should come together to make the whole run as intended. That is something that will not be attained without good forward-thinking people.

Apply the Learning

As I think about it, I see the parallel to our aim of being financially independent. We can’t possibly achieve this goal without thinking ahead and planning what steps we need to take. It won’t come to us unless we pursue it. And we ought to be smart with our actions as we pursue this goal. We don’t want to keep pressing on without forethought. Putting ourselves in front of probable outcomes will help us choose better paths.

So the central argument that I really want to push forward is this - we need more time creating and analyzing our plans before we clumsily move ahead. It seems an obvious idea but one that many people have failed to do especially with regards to their finances. For example, I hear of colleagues “taking advantage” of government loans to buy some electronic gadgets. I also see folks who spend their money acquiring land as “investments” without any idea how the returns will be realized.

I understand that some of us are just misinformed or may not have the proper skill yet. It’s not an excuse to do things the wrong way. It should be a good reason to seek people who know better. We are dealing with important matters and using our inkling is not the best way in many instances.

Developing Your Foresight

One of the basic financial planning tools we all should be employing is budgeting. The government has an annual budget that congress deliberates and is approved by the president. It’s a thorough process to get everything right. Its importance cannot be overemphasized because it tells where the priorities are. We should have a similar process for our own family’s budget.

Forecasting our expenses on a monthly basis for the entire year would make use of our foresight. Our estimates would not have to be perfect but a plan is critically important as accurate as we can make it. We can estimate our monthly incomes and plot that against our monthly expenses. Based from this, we can clearly visualize how our cash flow would look like. If the net effect is undesirable, we would be in a better position to adjust our plans to make it more workable.

Domino-Effect

When the year comes to a close, we can then review how it went against how we thought it would go. There are many things that we can learn from this process which we can use further on. It’s a cycle that continuously improves both our foresight and our financial well-being so let’s make it a habit.